Industrial production declined 0.1 percent in May after an increase of 0.8 percent in April.
Manufacturing production also fell 0.1 percent last month. The output index for mining moved down 0.2
percent, but the output index for utilities was up by the same amount. At 112.1 percent of the 2002
average, overall industrial output was 4.3 percent above its May 2005 level. The rate of capacity
utilization for total industry fell 0.2 percentage point, to 81.7 percent, a rate that is 0.7 percentage
point above its long-run (1972-2005) average. The factory operating rate fell 0.3 percentage point, to
80.5 percent, and the mining operating rate edged down to 89.6 percent, but the rates in both sectors
remained above their long-run averages. The capacity utilization rate for utilities edged up, to 86.5
percent, in May but remained slightly below its 1972-2005 average.

The output of consumer goods edged down in May. The index for consumer durable goods fell 0.8 percent.
The output indexes for automotive products; home electronics; appliances, furniture, and carpeting; and
miscellaneous consumer durables all declined. The output of consumer nondurable goods increased 0.2
percent; it was boosted by a jump of 2.8 percent in consumer energy products, which resulted primarily from
increases in the output of refined petroleum products, such as gasoline. In contrast, the output of
non-energy nondurable consumer goods was down 0.5 percent. Within this group, the indexes for food and
tobacco, clothing, chemical products, and paper products fell.

The production of business equipment declined 0.2 percent after an increase of 2.1 percent in April. The
production of transit equipment moved lower in May mainly because of a drop in the output of motor
vehicles. Declines in farm machinery and in construction machinery contributed to the drop in the
production of industrial and other equipment. On the plus side, the output of information processing
equipment rose 1.6 percent and was more than 20 percent above its year-earlier level. The output of
defense and space equipment climbed 1.1 percent. The production indexes for construction supplies and for
business supplies both moved lower after increases in the previous two months.

The output of industrial materials moved down 0.1 percent. The index for energy materials rose 0.2
percent, but the index for non-energy materials fell 0.2 percent. Within the durable materials component,
which fell 0.3 percent, the output of consumer parts, equipment parts, and other durable materials all
moved lower after large gains in April. The index for nondurable materials was unchanged. Within this
category, increases in the indexes for textiles, paper, and chemicals were offset by declines elsewhere.

Industry Groups

Manufacturing production declined 0.1 percent in May. The output of durable goods fell 0.2 percent. The
production of machinery dropped 1.7 percent, and the output of motor vehicles and parts declined 1.3
percent. Nevertheless, several durable goods industries posted gains, and large increases were reported in
the index for primary metals, which advanced 0.9 percent, and in the index for computer and electronic
products, which moved up 1.1 percent. The output of nondurable goods industries rose just 0.1 percent
despite a surge of 4.3 percent in the index for petroleum and coal products. The index for chemical
industries fell 0.4 percent and remained below its year-ago level; the index for food, beverage, and
tobacco products declined 0.2 percent. Production in the non-NAICS manufacturing industries (logging and
publishing) dropped 0.6 percent.

The output of mines declined 0.2 percent largely because of drops in the indexes for the mining and
quarrying of stone, sand, and gravel, which fell back from their high levels earlier this year. The index
for oil and gas extraction edged up 0.1 percent but remained 4.6 percent below its year-ago level. The
output of coal mines, which has risen 13.6 percent over the past year, advanced 0.4 percent in May. The
output of utilities rose 0.2 percent.

By stage of processing, capacity utilization for industries in the crude stage of processing increased
further, to 87.6 percent, a rate that is 1.2 percentage points above its 1972-2005 average. For industries
in the primary and semifinished stages of processing and for industries in the finished stage, utilization
rates moved lower in May but remained above their long-run averages.

Notice: This release includes updated estimates for 2006 from our semiannual review of industrial
capacity. The estimated rates of change between the fourth quarter of 2005 and the fourth quarter of 2006
for total industrial capacity and for manufacturing capacity are the same as in the previous estimates:
2.0 percent and 2.5 percent respectively.

Note. The statistics in this release cover output, capacity, and capacity utilization in the
U.S. industrial sector, which is defined by the Federal Reserve to comprise manufacturing,
mining, and electric and gas utilities. Mining is defined as all industries in sector 21 of the
North American Industry Classification System (NAICS); electric and gas utilities are those in
NAICS sectors 2211 and 2212. Manufacturing comprises NAICS manufacturing industries (sector 31-33)
plus the logging industry and the newspaper, periodical, book, and directory publishing industries.
Logging and publishing are classified elsewhere in NAICS (under agriculture and information
respectively), but historically they were considered to be manufacturing and were included in
the industrial sector under the Standard Industrial Classification (SIC) system. In December 2002
the Federal Reserve reclassified all its industrial output data from the SIC system to NAICS.